Income protection insurance has attracted only a small percentage of the eligible population as compared with private health cover. This is principally because income protection insurance is not as widely understood as health insurance or life insurance.
The majority of Australians, unfortunately, do not adequately appreciate the need for disability income insurance nor the benefits of having it.
Disability insurance works within a fairly simple framework.
Income protection insurance is fundamentally quite straight-forward.
If you suffer an injury or illness that prevents you from doing your job and earning your income, your income protection policy pays you a monthly income benefit. The dollar amount of the monthly payment that you receive will be dictated by both the amount of insurance you bought and the specific terms and conditions of the the policy that you purchased.
Whilst the word disability conjures up images of crutches and neck braces, people often forget that things like anxiety and stress as well as the onset of long-term traumatic conditions like cancer, stroke etc make up the majority of time lost from work over the long term. Irrespective of the cause, income protection is critical in making up the income loss.
It's not just hospital bills and doctors fees.
It's very possible that you could need significant levels of medical attention to overcome your disability and to enable you to return to work. Private health insurance is designed to protect you financially by contributing toward the costs of this care.
At the same time it's vitally important to remember that the medical bills are only part of the financial problem that you may face.
In the absence of effective disability income protection insurance, hanging on to your house, vehicle, savings, etc can become difficult if your earning capacity is diminished.
The actual monthly benefit paid under an income protection claim is generally around 75% of pre-disability gross earnings. This may vary from insurer to insurer in accordance with their policy terms and conditions.
Without financial support through what could be a slow recovery could
determine whether you can maintain your lifestyle or lose everything that you've
Whilst no-one really likes the prospect of considering the worst, you should give consider how you could best deal with the financial consequences of a disability and plan accordingly.
Although few people enjoy planning for a worst case scenario, spending some time figuring out how you could financially weather becoming disabled may lead you to put some important plans into place.
Being prepared and protected for a loss of income is the ideal situation. Good planning is sound financial management ... and being secure financially means less stress!